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Alitalia deal in jeopardy after heated talks

First talks between Italian union leaders and Air France-KLM ended in disagreement on Tuesday. Both sides warned the deal may fall through, though the French airline's chairman said he remained confident.

Italian union leaders and the boss of Air France-KLM, the European giant that wants to take over the near-bankrupt Alitalia, warned Wednesday the deal may fall through after an acrimonious start to negotiations.

Talks on Tuesday with the nine unions involved were held in a tense atmosphere and ended in disagreement.

The main unions issued a joint statement saying they had a "very critical judgement" of the talks and argued that the negotiating timetable was unrealistic -- Air France-KLM wants an agreement by the end of March.

Spinetta, who was to hold a news conference in Rome at 4:00 pm (1500 GMT), is thought to want to renew contact with the unions, whose green light is necessary for the deal to go forward.

A labour source told AFP that union leaders would meet early Thursday with Alitalia alone.

Padoa-Schioppa told Wednesday's Corriere della Sera that "sale or bankruptcy" were the only options for Alitalia, which is losing about one million euros (1.6 million dollars) a day.

"Anything can happen," he said. "I'm an ambulance driver rushing a patient to the only hospital that has agreed to admit him. I'm driving as fast as I can but I may not make it in time because red lights are slowing me down."

Padoa-Schioppa warned that emotions were getting in the way of a rational approach to rescuing the airline.

While Air France-KLM plans to cut 1,600 jobs from the 11,000-strong work force, the unions fear job losses of up to 7,000.

The takeover plan also entails massive cutbacks of operations at Milan's Malpensa airport and is opposed by many politicians in the north, a right-wing stronghold.

Spinetta warned on Tuesday that his company could walk away from the deal.

"We are certainly not obliged to acquire Alitalia," Spinetta said, according to a labour leader who was present at the talks.

Italy's outgoing centre-left government on Monday approved the acquisition of the state's 49.9 percent stake through a share swap of one Air France-KLM share for every 160 Alitalia shares.

That values the Italian airline at 140 million euros (218 million dollars).

The talks at Alitalia headquarters on Tuesday began shortly after a group of protesters trying to enter the building clashed with police, leaving one demonstrator slightly injured.

Some 350 demonstrators took part in the protest including employees of AZ Servizi, the maintenance unit that would be shut down under the takeover deal.